With its first franchise agreement outside the county and a new location in San Luis Obispo, Doc Burnstein’s Ice Cream Lab is poised to expand into larger markets, owner Greg Steinberger says.
Doc Burnstein’s Ice Cream Lab began in 2003 as a collaboration between Steinberger and Burnardo’z Candy Kitchen and Ice Cream founder Chuck Burns, after Burnardo’z ice cream shop in Arroyo Grande went out of business.
Doc Burnstein’s has since grown to three locations, with one in the original space in The Village on Grand Avenue, one in Orcutt and the newest location in downtown San Luis Obispo, which opened in January.
The SLO location was a big step in Steinberger’s overall growth plan, he said, partly because it helped him realize that he could renovate other ice cream shops to fit the company’s model. (The site was a Coldstone Creamery, before it closed in early 2013.)
The SLO store was also unusual because it was funded by a public stock offering that transformed the company into a community-owned business. During the public stock offering, the company sold 8,000 new shares, totaling $400,000, to pay for the renovations, according to the company’s 2013 annual report.
Steinberger said he originally got the idea to offer shares in the company from the Green Bay Packers, the only nonprofit, community owned major league sports team in the United States.
“The team loves the community, and the community loves the team — they are interlaced,” Steinberger said. “I wanted to create that sort of feeling with my company, where the community knows Doc Burnstein’s is rooted here. It’s not leaving.”
Steinberger put several regulations on the public offering, however, which limit individual shareholders from owning more than 5 percent of the company (because of his role as founder, Steinberger was grandfathered in with 38 percent of shares, but cannot purchase more, he said).
Over the past three years, Doc Burnstein’s has generated more income, but its expenses have also grown as it expanded, the company’s financial documents show.
Net income went from $19,612 in 2011 to $3,950 in 2012 to a net loss of $48,689 in 2013. Steinberger attributed the net loss to the delayed opening of the San Luis Obispo store, which caused additional rent, labor and overhead costs. Still, he said in his annual letter to shareholders, “we consider this an investment in the future as initial sales in SLO are greatly exceeding forecasts, and SLO looks to make back this investment/losses within the first 12-18 months.”
So far this year, Steinberger said, sales at all three stores have more than doubled, and profits for the first half of the year are up from where they were the year before.
The company budgeted total sales to reach $2.5 million this year — up from $1.4 million last year — and operating profit to increase by 8 percent, largely due to sales in SLO, higher wholesale sales and management’s decision to simplify operations by eliminating novelty ice cream items and cutting back sales at public events. (Doc Burnstein’s is replacing those public event sales with more pre-paid catering events, which are more consistently profitable, according to Steinberger’s letter to shareholders.)
The company is also broadening its reach beyond San Luis Obispo and northern Santa Barbara counties — with an ultimate goal to become a household name. “What Ben and Jerry’s is to people, that’s what I want Doc’s to be in the future,” Steinberger said.
Recently, the company franchised with gift and wine shop Bravo Farms in Kettleman City to sell Doc Burnstein’s ice cream at the popular stop along Interstate 5 and Hwy 41. This is the first time the company has franchised its ice cream to a business outside of San Luis Obispo County.
The company currently sells ice cream at six other shops in the county, including Rocky Mountain Chocolate Factory in Paso Robles and the Hula Hut in Avila Beach.
Even though Steinberger is considering more franchise agreements throughout the state, he said his next step is setting up a production facility somewhere in the county where he can produce ice cream.
All Doc Burnstein’s ice cream is made in-shop, and that can put some limitations on supply, Steinberger said.
He has been in talks with Cal Poly’s dairy sciences program about possibly using cream from the college’s cows and contracting with the university for it to make Doc Burnstein’s ice cream, he said.
Haley Marconett, communications director for Cal Poly College of Agriculture, Food and Environmental Sciences, confirmed Steinberger has been in talks with the school about producing the ice cream there, though she cautioned plans were still in the early stages.
“It would be a great opportunity for our students to be able to get that sort of hands-on learning we are known for,” Marconett said. “Several logistical items need to be worked out and talked through beforehand, of course: volume, ingredients, that sort of thing.”
In the meantime, Steinberger is focusing his energy on registering the company as a “beneficial corporation” with The B Lab, a nonprofit dedicated to encouraging better economic and social practices among corporations.
Though the company scored well in the employee and community designations because of its monthly blood drives and annual employee scholarship days, the company didn’t perform well in the environmental requirements because of its electricity usage. Steinberger said he hopes to make that up by implementing small changes like swapping plastic to-go cups and straws with biodegradable replacements, and contacting his supply chain about green updates.
“In about one generation, these are going to be as common as for-profit companies,” Steinberger said. “That’s exciting that that’s what we could become.”